In the mid-1990s, Wharton professor Jeremy Siegel published his famous tome “Stocks For The Long Run,” whose title quickly became one of the leading mantras of the Great Bubble. The book is excellent, but the market’s performance since the Great Bubble peaked in 2000–negative–underscores an important point: The “long run” is long. — Ed.
Here is a update in response to a standing request from David England, a professor who has developed a popular college level stock market classes at John A. Logan College in Carterville, IL. In his presentations, he likes to disprove the standard message of Wall Street, “Don’t worry! The market will always come back.” I furnished David with some charts, and I now share them with regular visitors to my Advisor Perspectives pages.
Specifically, David had asked for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. So I created two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which I usually just refer to as the CPI). The charts below have been updated through yesterday’s close.
The charts require little explanation. So far the 21st Century has not been especially kind to equity investors. Yes, markets usually do bounce back, but often in time frames that defy optimistic expectations.
The charts above are based on price only. But what about dividends? Would the inclusion of dividends make a significant difference? I’ll close this post with a reprint of my latest chart update of the S&P 500 total returns since the 2000 high.
Total return, including reinvested dividends, looks better, but it does not significantly change the trend.